In May 2015 they manufactured 15,700 suits. For the month of May the following standard and actual cost data are available. The normal monthly capacity of the company is 20,000 direct labor hours. All material purchased in May was used in June production.
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Standard per Suit
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Actual
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Direct materials
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5.0 yards @ $6.75 per yard
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$547,200 for 76,000 yards
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Direct labor
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1.0 hours @ $11.45 per hour
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$165,760 for 14,800 hours
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Overhead
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hours @ $9.40 per hour
(fixed $6.25; variable $3.15)
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$120,000 fixed overhead $49,000 variable overhead
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Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs are $125,000 per month and budgeted variable overhead costs are $63,000 per month.
Required
- Calculate the direct materials price variance for MAy. Label the variance as favorable or unfavorable.
- Calculate the direct materials quantity variance for May. Label the variance as favorable or unfavorable.
- Calculate the direct labor rate variance for May. Label the variance as favorable or unfavorable.
- Calculate the direct labor efficiency variance for May. Label the variance as favorable or unfavorable.
- Calculate the controllable overhead variance for May. Label the variance as favorable or unfavorable.
- Calculate the overhead volume variance for MAy. Label the variance as favorable or unfavorable.
- Which of the variances should be investigated if management considers a variance of more than 5% from standard to be significant?